Residential construction picks up in the Grand Rapids area, still down in Kalamazoo

The residential construction market is pulling out of its slump in West Michigan — more quickly in the Grand Rapids area than the surrounding communities.

Builder Doug Butterworth said he began to see interest increase last year among his customers — those in the custom-built home and renovation market — with 2011 coming in much stronger.

“I’ve got some strong interest going into next year,” he said.

Pent-up demand from people who held off buying or upgrading homes for the past few years as the economy teetered is giving way as some local, independent banks begin to make loans at low interest rates, said Emily Siebert, executive officer of the Home & Building Association of Greater Grand Rapids.

“Other indexes are also increasing — consumer confidence is up and housing values for the past three months has consistently increased,” she said. “It’s not a huge upward trend, but we do expect it to be up by the end of the year.”

Contracts for future residential construction in July — the most recent data available — was up 68 percent to almost $19.1 million this year compared to almost $11.4 million for the same month a year ago in the Grand Rapids metropolitan statistical area, according to McGraw-Hill Construction. For the first seven months of the year, residential construction rose 13 percent to almost $114.7 million from nearly $101.3 million for the same time in 2010.

The Muskegon and Holland areas also showed increases.July residential construction in Holland increased 22 percent to almost $7.1 million compared with $5.8 million in July 2010. The year-to-date total of $53.3 million is up 7 percent compared with $49.9 million for the same period last year.

Muskegon’s residential construction grew 74 percent in July to $1.3 million, up from $772,000 a year ago. For the first seven months of the year, however, residential growth slowed, dropping to $7.8 million compared with $9.6 million in 2010.

In the Kalamazoo area, however, future construction contract figures were down 39 percent in July to $5.1 million compared with $8.4 million in July 2010. Construction contracts for the year dropped 22 percent to $35.3 million compared with $45.5 million.

“It is down and it has been down for three years,” said Dale Shugars, executive vice president of the Home Builders Association of Greater Kalamazoo.

“There’s a lot of barriers in the economy,” Shugars said. “Not only is there a lack of jobs and a lack of confidence in national leadership, there are rumors of the government eliminating the mortgage interest deduction or eliminating Fannie Mae and Freddie Mac. There’s also talk of trying to mandate a 20 percent down payment for mortgages.”

Fear and uncertainty about the economy is keeping would-be buyers out of the market, while at the same time, more houses are coming on the market through foreclosure sales.

“Foreclosures and homes not being sold is a drag on the sale of new homes,” Shugars said.

Joe Alexander, general manager of Powell Custom Homes in the Kalamazoo area, agreed.

“For one, it takes a buyer away,” he said. “But mostly it’s what it does for appraisals. People can’t get the value of the house to build a new one and building costs are going up.”

In business since 1975, Powell will remain. But the downturn of the past three to four years has affected the construction industry, Alexander said.

“New construction is almost nonexistent,” he said. “There are two problems: No one feels good about their jobs and there are no new jobs. Secondly, the banking industry is making it extremely difficult for people to get mortgages, putting more parameters on people.”